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Thursday, July 2, 2009

Competition is Essential

Competition is EssentialBy: Bronwen RobertsCompetition, deregulation, and intervention are all crucial to South Africa's road to a true broadband infrastructure.As of this year, SA had some 67,000 ADSL subscribers. This represents about 0.4% of the worldwide total, and supports the statement that SA remains, and will remain, way behind the rest of the world for a long time to come.

Broadband penetration in households varies globally, with Korea being the world leader with a penetration of 68%, the USA having 28%, and the UK 16%. SA shamefully has a broadband household penetration of 0.3%. The question posed here is why South Africa is so far behind... The answer lies not, in the unavailability of the technology, but simply in the pricing. Many people think that Telkom's ADSL solution is one-step closer to a true broadband solution in this country. However, many industry specialists disagree.

"Telkom's ADSL offerings are great; however they just cost too much, and are not viable solutions for many home users," says Dave Gale, business development manager at Storm. "South Africa's broadband costs may be the butt of global jokes, but to local users, especially individuals, schools, small businesses and current ADSL users, the affordability factor just makes one's blood boil", says Michelle Branco; product-marketing manager at Internet Solutions. South African BroadbandAccording to Elia Tsouros, an executive at UUNET, the broadband penetration in SA is abysmal compared to that of other countries. One contributing factor is Telkom's pricing structure, and, the fact that SA is so large, and has such a distributed population. The ramifications are vast - a slowing down of broadband uptake; a barrier for educational institutions; limitation for learners to gain access to the Internet; poor response times for researchers; limited business and marketing opportunities and the list goes on.The absence of a wholesale facilities leasing regime for ADSL in South Africa makes it difficult for ISPs to get a significant portion of the ADSL revenue. ISPs are not entitled to ADSL line rentals at wholesale prices, and thus subscribers have to rent the line directly from the incumbent, Telkom.

This then further negates the opportunity for ISPs to bundle value-added offerings, such as video and voice services with the ADSL line. Coupled with the high cost of line rentals is that of international bandwidth. Telkom international bandwidth charges on the SAT-3 cable are very high, and it is common knowledge that even though both Telkom and British Telecoms purchase their bandwidth from the same supplier; Telkom marks up its costs by 80%, and British Telecoms by only 20%.

Roman Hogh, product development manager at M-Web Business, says that Icasa should have the power to audit how much Telkom charges for the cable. Solutions On the HorizonAt present in SA, broadband is still deemed by the majority as ADSL, even though there are other wireless solutions available in the market, such as Sentech's My Wireless, Wireless Business Solution's (WBS) iBurst, and cellular solutions like 3G, Edge and GPRS. All of the industry players say that in order to get this country on the road to true broadband, we need competition. According to Gale, just having a second network operator will not cut it. "When the SNO comes into play it will be piggybacking on Telkom's infrastructure for the first couple of months, so it will not help much in terms of increasing our amount of broadband." According to Tsouros, the SNO will be able to use up to 15% of Telkom's current infrastructure. Gale does however say that the SNO will be competing with Telkom over customers - the result being a price war. Fusion Reactor director, Grant Jackson, says that the fact that Telkom is the only company that can self-provision is putting a dampener on the road to true broadband. "Should ISPs be able to self-provision there will be much more competition," he says. He goes on to say the ISPs have to deal with Telkom whether they like it or not, and at the end of the day, although they are adding some sort of value-added services to the client, the base solution costs are dependent on Telkom. What are the alternatives?Unfortunately, we do not have a choice when it comes to wired broadband solutions. However, we do have a few alternatives when it comes to the wireless space. Sue Richardson, Gartner analyst, comments, "In European countries that already have strong fixed-line broadband solutions, wireless technologies such as WiMax complement the fixed-line solutions. In SA these wireless solutions could be seen as an alternative."

She went on to say; SA's geographic situation is unique. "Fixed lines are currently not available in many parts of SA, and a solution such as WiMax means that people living in these areas will have some sort of Internet connectivity".Chris Norton, country manager for Citrix, believes that wireless broadband makes more sense than a wired solution. "A wired solution is point to point," he says. "In other words a user has to be sitting in his or her office in order to make use of the broadband solution. However, more and more employees are adopting the 'mobile office route'. Corporates are still a little skeptical, when it comes to users working out of the office - especially when it comes to security. However, in the near future, more and more corporates will be adopting the wireless route. Wireless solutions could definitely be an alternative to fixed-line solutions in South Africa." He continued to say, "Presently, if we take a technology such as WBS's iBurst; it is advertised that it has a transfer rate of 1Mb. This sounds quite a lot. However, what people do not realise is... this is just a burst speed (or the maximum transfer speed a user will get) but they will not have this all of the time."

Norton believes that 3G is the broadband solution of the future. "If you think about it, the infrastructure is already in place, and, although 3G coverage is still rather limited; mobile players are the ones with the money; and because of this, 3G will evolve the quickest.